Question

JJ MoneyTree Inc.'s free cash flow during the just-ended year (t = 0) was $156 million, and its FCF is expected to grow at a constant rate of 3.0% in the future. If the weighted average cost of capital is 10.25%, what is the firm's total corporate value, in millions?

Answer 1

$2,216.28 million

Step-by-step explanation:

JJ MoneyTree Inc firm's total corporate value shall be determined through the following mentioned formula:

Total Corporate value= [(Free Cash Flow(1+g))/(WACC-g)]

In the given question:

Free Cash Flow=$156 million

g=constant growth rate=3%

WACC=10.25%

Total Corporate value= [(156(1+3%))/(10.25%-3%)]

=$2,216.28 million